Managing money to save tax is not immoral, says the law

Lisa Smith, BA (Hons), CeFA
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The row over the morality of investing in a tax management scheme aimed at working within the law to save tax highlights the current ‘anti avoidance’ stance of the UK government.

Over recent years, HM Revenue & Customs, the Treasury and ministers have worked hard to link the word ‘avoidance’ with illegal activity.

The issue for anyone looking to pay the least tax possible is not one of morals, but one of law.

Tax avoidance by managing your financial affairs prudently is perfectly legal and moral – whereas tax evasion is not.

If the taxman comes calling, the relevant case law is Ayrshire Pullman Motor Services & Ritchie v Inland Revenue Commissioners (1929 14TC754). Although this case is almost 100 years old, the judges comments are just as relevant today as they were then.

The judge, Lord Clyde, said in his ruling: “No man is under the smallest obligation, moral or other, to arrange his legal relations to his business or to his property as to enable the Inland revenue to put the largest possible shovel in to his stores.

“The Inland Revenue is not slow – and quite rightly – to take every advantage which is open to it for taxing statutes for depleting the taxpayer’s pocket. And the taxpayer is, in like manner, entitled to be astute to prevent, as far as he honestly can, the depletion of his means by the Revenue.”

Over the years, this case has been a beacon for taxpayers facing the wrath of HM Revenue & Customs.

Another case that supports the view of Lord Clyde is Inland Revenue Commissioners v The Duke of Westminster (1936).

Lord Tomlin said in his ruling: “Every man is entitled , if he can, to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be.”

Rather than speak in public about a taxpayer’s personal affairs, Prime Minister David Cameron should understand the law is specific about the morals of tax planning and comes down squarely on the side of the individual, providing the action is within the law.

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